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‘It’s a great option, especially for first-time buyers when affordability may be an issue’ – Star Letters 28/06/19

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  • 28/06/2019
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Each week Mortgage Solutions and its sister title Specialist Lending Solutions select the most thoughtful or thought-provoking comments from our readers in our Star Letter.

 

This week the issue of longer lending terms and how they affect younger and older clients prompted two views from either end of the scale.

 

First was Robert Drury with his response to the article: Forty-year terms gain popularity as lenders help borrower affordability – Moneyfacts.

Robert said: “I think it is a great option to be able to offer clients a longer term especially for first-time buyers, when affordability may be an issue and as they get used to their first mortgage payment.

“Darren [Cook, spokesman at Moneyfacts] quite rightly points out that taking a longer mortgage term could lead to additional interest accumulating over an extended mortgage, which could be considerable.

“However, by maintaining that customer-adviser relationship and ensuring that our clients regularly review their mortgage year-on-year, the term will automatically become something that is reviewed.

“Therefore, an initial 40-year term may well end up being shortened, either by clients committing to overpaying as their disposable income hopefully improves over time, or by actually reducing the term with agreement from the lender.

“However just having the option to look at the longer term to begin with gives us as advisers more options to offer our clients.”

 

Complaints coming down the line

Second was Andy Wilson who commented on the article: Advisers without equity release qualifications could be doing later life clients a disservice – Phillips.

Andy said: “I believe that allowing mortgage advisers to provide lending advice on products running well into, or throughout, a borrower’s retirement is going to lead to complaints down the line.

“There are already an increasing number of complaints over interest-only advice received years ago which mean the retired borrowers are paying mortgages they can’t afford up to and beyond age 80 – I have seen many.

“Without the knowledge to apply a holistic view on later life borrowing, advisers may miss important options that could serve a client better.

“They will need knowledge of equity release options, which include products with interest rates close to retirement interest-only (RIO) rates, but it is more than that.

“There are currently big debates around client vulnerability, long term care funding issues, later life mental capacity and so on.

“A client may be fine and healthy at age 65, but what happens when they get to 75, are suffering from dementia and still have a mortgage to pay?

“What is the actual financial effect on the remaining borrower of one partner dying and their pensions dying with them?

“I know mortgage advisers can find this information, but can they then relate it to state benefit entitlement?”

 

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